Clothing exports to get leverage from Jan 1

21 Dec '10

3 min read

There are sound reasons for the International Monetary Fund's apprehension regarding Cambodia's constantly shrinking export base, but in spite of the slow rate of economic improvement amongst these nations, the indications for major markets – the United States and Europe for next year appear to be rather good than expected.

The International Monetary Fund (IMF), while considering that 40 percent of the Cambodia's overall exports are towards the US and Europe, has warned the garment sector of the dangers that are likely to follow in the long-run because of a fragile world economy. However, all the indicators right now are suggest that Cambodia's garment industry would have a steady demand from these major markets in the early part of next year, which indicates that the earnings, at least, will keep on increasing.

Moreover, from January 1st onwards, Cambodia will have duty-free access for almost all its garment exports to European Union as it is going to adopt a new law on the rules of origin, which minimizes the responsibility of value addition on the exporting country.

As stated by the Garment Manufacturers Association of Cambodia, the new legislation would greatly benefit the country, as under the current legislation the country many times does not enjoy the zero -duty status owing to its dependence on the imported raw materials.

Thus it follows that, despite of financial crisis in Portugal, Greece, Spain and Ireland, the demand for Cambodian garment is believed to rise owing to their reduced cost and increased ability to compete other world markets already enjoying zero-duty status, post imposition of the new rule.

Also, the sales figures registered by the retailers like JC Penney Co, Target and Macy's, and clothing labels like Abercrombie & Fitch in the US last month, too, remained to be above expectation. All of them import garments from Cambodia. Theoretically, this should lead to a reduction in the stocks and raise the demand for Cambodian garments in the coming year.

But then, General Ken Loo, Secretary of GMAC, had said that it is not certain that all this would result in a total revival of the sector or increase the revenues of the garment units in Cambodia, as with this year's recovery, the Kingdom has yet not been able to wipe out last year's loss. Apart from this, since the very beginning of the current year, there has been a jump of 60 percent in the cost of fabrics and the cotton prices, too, escalated at an even greater pace.

Fibre2fashion News Desk - India

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